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21 Aug 2009, 11:46

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153. Technological improvements and reduced equipment costs have made converting solar energy directly into electricity far more cost-efficient in the last decade. However, the threshold of economic viability for solar power (that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more economical than new oil-fired power plants) is unchanged at thirty-five dollars.

Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power has not decreased its threshold of economic viability?(A) The cost of oil has fallen dramatically.(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs for that equipment.(C) Technological changes have increased the efficiency of oil-fired power plants.(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically viable.

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153. Technological improvements and reduced equipment costs have made converting solar energy directly intoelectricity far more cost-efficient in the last decade. However, the threshold of economic viability for solar power(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be moreeconomical than new oil-fired power plants) is unchanged at thirty-five dollars.Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power hasnot decreased its threshold of economic viability?(A) The cost of oil has fallen dramatically.(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costsfor that equipment.(C) Technological changes have increased the efficiency of oil-fired power plants.(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.(E) When the price of oil increases, reserves of oil not previously worth exploiting become economicallyviable.

It is a good tricky CR question. People with a quantitative bent of mind would love it, I am sure.Let me put some numbers here to make it clearer. You need the numbers to understand that a paradox exists. Once you do understand that, resolving it is very simple.

Sunlight is free. Infra needed to convert it to electricity is expensive. Say for every one unit of electricity, you need to spend $50 in a solar power plant.

Oil is expensive. Infra needed to convert it to electricity, not so much. Say for every one unit of electricity, you need to spend $40 in an oil fired power plant. Say, the split here is $25 + $15 ($25 is the cost of oil used and $15 is cost of infra for a unit of electricity).

Oil based electricity is cheaper. If the cost of oil rises by $10 to $35, solar power will become viable. This $35 = the threshold of economic viability for solar power = the price per barrel to which oil would have to rise (mind you, this isn't the actual price of oil)

What happens if you need to spend only $45 in a solar power plant for a unit of electricity? Would you expect 'the threshold of economic viability for solar power' to go to 30? Yes! Now, for solar viability, 'cost of oil + cost of infra in oil power plant' should be only $45. 'Cost of infra in oil power plant' = 15 so we need the oil to go up to $30 only. That will make solar power plants viable. So the threshold of economic viability should decrease.

But the threshold of economic viability for solar power is still $35! It doesn't decrease. That is the paradox! How do you resolve it? By saying that 'Cost of infra in oil power plant' has also gone down by $5 and is only $10 now.

This is what the scene is like now:

Sunlight is free. Infra needed to convert it to electricity is expensive. For every one unit of electricity, you need to spend $45 in a solar power plant.

Oil is expensive. Infra needed to convert it to electricity, not so much. For every one unit of electricity, you need to spend $35 in an oil fired power plant. The split now is $25 + $10 ($25 is the cost of oil used and $10 is cost of infra for a unit of electricity).

You still need the oil price to go up to $35 so that cost of electricity generation in oil power plant is also $45. So you explained the paradox by saying that "Technological changes have increased the efficiency of oil-fired power plants." So, option (C) is correct.

If you think about it now, the actual price of the oil has nothing to do with 'the threshold of economic viability for solar power'. This threshold is $35 so you need the oil to go up to $35. Whether the actual price of oil is $10 or $15 or $20, it doesn't matter. It still needs to go up to $35 for solar viability. So option (A) is incorrect.
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21 Aug 2009, 13:06

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C) Correct. For Solar plants to become more viable, oil price has to go up so that electricity generated by Oil plants become costlier than Solar plants because as Oil-fire based technologyalso evolved. So if oil price doesn't go above $35, oil based electricity will be cheaper.

Also in "(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more economical than new oil-fired power plants)", author is comparing Solar plants to new oil based plants.

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08 Mar 2011, 20:43

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noboru wrote:

boeinz wrote:

How to kill 'A'?

Same here.I agree with C; but A is also correct.Could anybody clarify?

A is incorrect because the premise also said that the the price per oil barrel is unchanged (=$35). We cannot change the premise of the argument. A is counter-fact in saying that oil price has fallen.
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let us say earlier it used to cost $50 to get 1 unit of power using solar power system....and one barrel of oil costing $20 produced 1 unit of energy using oil fired system....

oil wud have to rise to $50 per barrel so that we cud switch to solar power...or solar power wud have to fall to $20 to make the switch economically viable...

Now if Oil prices have fallen dramatically!!! we were getting 1 unit from $20 of oil...lets say oil prices have fallen to $5 per barrel .... and now we are getting 1 unit from oil power for $5 ...

Also solar power has become more efficient...say now we are getting 2 units of energy from $ 50 using solar power...this means 1 unit for $25 ... in this case solar power wud have to fall to $5 or oil wud have to rise to $25 .... SO you can see THRESHOLD HAS CHANGED....BUT ACCORDING TO STIMULI THRESHOLD REMAINS UNCHANGED...

sO wat wud have happened..??

now with increased efficiency..we can get 2 units of energy from solar power and it still costs us $50 ....

As the stimuli says the threshold remains the same.... wat if oil power plants have become efficient ... earlier we were getting 1 unit from $20 ...NOW WE GET 2 UNITS USING $20 ...???

in this case..either solar power drops to $20 or oil rises to $50 .... threshold remains the same...

Important thing in this question is THRESHOLD....thats wat makes it confusing....hope it helps...

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13 Sep 2011, 01:20

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firstly, the argument compares the efficiency of Solar energy manufaction nowadays with the solar energy manufaction last decades and concludes that solar energy today is created more efficiently than the past solar energy did.Second, it raises the paradox that why the efficiency of solar energy comparing with efficiency of other kinds energy like oil is unchanged (through a blah blah blah measure called threshold or oil price rise whatever) ??? The reason that other energy like oil is also improved in technical is a possible concilement for the paradox which underminds the author's presumtion.(A) does not give any resolution for paradox when saying that oil price is fallen. If oil price falls rather than increases, the efficiency of solar energy operation is decreased relatively with other kind of energy while the premises also said that the connection between these two energy is unchange though a decade by giving evidence of threshold viability of 35$.
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21 Nov 2015, 19:37

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Threshold is simply a dollar value to which oil prices must rise.. If efficiency of Solar Power Plants were to remain same as before, and oil prices were to drop significantly (with same constant oil power plant efficiency as before) , the threshold will remain the same. This is why I stressed on the to vs. by difference in the question's definition of threshold. It is the price TO which prices must rise.

Take for example, threshold value is 35$.Now if oil prices are 20$ today, it has to rise to 35$. If it is 30$, it has to rise to 35$. If it falls to 1$, it still has to rise to 35$. It is a standard irrespective of current oil trends. If it were written "the price BY which oil prices...", it would mean the threshold would attain values 15$,5$,34$ assuming solar prices are at 35$ in the above example.

Another example: Suppose Solar power plants remain at same efficiency, but Oil plants improve theirs. Now oil would be produced at much cheaper rates, so its economic viability will rise.. In other words, economic viability of solar power plant with respect to oil plant will reduce(since now it is much preferable to produce oil generated power). This viability is quantified by 'threshold'. Since Oil is now much more 'viable' source of energy compared with Solar power, threshold will now rise.

However, a much preferable approach to solving this question is by eliminating all other options, which is possible if you are able to spot that subtle difference 'to and by' which changes the meaning of threshold entirely if they are used interchangeably.

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153. Technological improvements and reduced equipment costs have made converting solar energy directly intoelectricity far more cost-efficient in the last decade. However, the threshold of economic viability for solar power(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be moreeconomical than new oil-fired power plants) is unchanged at thirty-five dollars.Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power hasnot decreased its threshold of economic viability?(A) The cost of oil has fallen dramatically.(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costsfor that equipment.(C) Technological changes have increased the efficiency of oil-fired power plants.(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.(E) When the price of oil increases, reserves of oil not previously worth exploiting become economicallyviable.

It is a good tricky CR question. People with a quantitative bent of mind would love it, I am sure.Let me put some numbers here to make it clearer. You need the numbers to understand that a paradox exists. Once you do understand that, resolving it is very simple.

Sunlight is free. Infra needed to convert it to electricity is expensive. Say for every one unit of electricity, you need to spend $50 in a solar power plant.

Oil is expensive. Infra needed to convert it to electricity, not so much. Say for every one unit of electricity, you need to spend $40 in an oil fired power plant. Say, the split here is $25 + $15 ($25 is the cost of oil used and $15 is cost of infra for a unit of electricity).

Oil based electricity is cheaper. If the cost of oil rises by $10 to $35, solar power will become viable. This $35 = the threshold of economic viability for solar power = the price per barrel to which oil would have to rise (mind you, this isn't the actual price of oil)

What happens if you need to spend only $45 in a solar power plant for a unit of electricity? Would you expect 'the threshold of economic viability for solar power' to go to 30? Yes! Now, for solar viability, 'cost of oil + cost of infra in oil power plant' should be only $45. 'Cost of infra in oil power plant' = 15 so we need the oil to go up to $30 only. That will make solar power plants viable. So the threshold of economic viability should decrease.

But the threshold of economic viability for solar power is still $35! It doesn't decrease. That is the paradox! How do you resolve it? By saying that 'Cost of infra in oil power plant' has also gone down by $5 and is only $10 now.

This is what the scene is like now:

Sunlight is free. Infra needed to convert it to electricity is expensive. For every one unit of electricity, you need to spend $45 in a solar power plant.

Oil is expensive. Infra needed to convert it to electricity, not so much. For every one unit of electricity, you need to spend $35 in an oil fired power plant. The split now is $25 + $10 ($25 is the cost of oil used and $10 is cost of infra for a unit of electricity).

You still need the oil price to go up to $35 so that cost of electricity generation in oil power plant is also $45. So you explained the paradox by saying that "Technological changes have increased the efficiency of oil-fired power plants." So, option (C) is correct.

If you think about it now, the actual price of the oil has nothing to do with 'the threshold of economic viability for solar power'. This threshold is $35 so you need the oil to go up to $35. Whether the actual price of oil is $10 or $15 or $20, it doesn't matter. It still needs to go up to $35 for solar viability. So option (A) is incorrect.

Hello.

Can you please explain what is wrong with (E)? If, every time price of oil goes up, and previous reserves that were not available for use end up becoming available, it suggests that the oil manufacturers have been successful in manipulating the supply, and therefore the price of oil to keep it low enough to make solar energy not economically feasible.

(E) When the price of oil increases, reserves of oil not previously worth exploiting become economicallyviable.

What could be the implication of (E)? That the extra oil availability would keep actual oil prices low.

The point is that actual price of oil has NOTHING to do with 'the threshold of economic viability for solar power'. For solar viability, the OIL PRICE needs to GO UP TO $35. This $35 is the threshold of economic viability. It doesn't matter what the actual cost of oil is right now.
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22 Aug 2009, 06:57

lalmanistl wrote:

C) Correct. For Solar plants to become more viable, oil price has to go up so that electricity generated by Oil plants become costlier than Solar plants because as Oil-fire based technologyalso evolved. So if oil price doesn't go above $35, oil based electricity will be cheaper.

Also in "(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more economical than new oil-fired power plants)", author is comparing Solar plants to new oil based plants.

-STL

Ohh....i shuldnt miss this kinfd of ques.. ya thanks for explaining.. And congrtas for your first Kudos